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  <title>BBC NEWS | Business | US interest rates left unchanged</title>
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  US interest rates left unchanged
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      The US Federal Reserve has kept its key interest rate unchanged at 2% as it grapples with the twin dangers of possible recession and high inflation.
    	  
  	
    
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      Explaining their decision, policymakers said economic growth was likely to remain weak for some time while the outlook for inflation was "uncertain".

    	  
  	
    
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      Consumer prices rose at their fastest monthly rate in 11 years in June but oil prices are currently falling.

    	  
  	
    
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      The Fed cut rates aggressively in late 2007, but have frozen them since April.

    	  
  	
  

  
  
  
  
  
  
  
  
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      'Tight credit'
    	  
  	
    
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      The Fed's rate setting committee voted 10 to one to keep rates where they are, with Richard Fisher dissenting in favour of a rate hike.

    	  
  	
    
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      Experts say uncertainty over how severe and prolonged the economic slowdown will be is making the Fed cautious about any shift in policy.

    	  
  	
    
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      The continued slump in the housing market and its impact on consumer confidence has made any imminent rate rise unlikely despite signs of increasing inflationary pressures.

    	  
  	
    
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      My view has been all along and it remains that the Fed is going to be on hold for a good deal of time
    	  
  	
    
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      Josh Feinman, Deutsche Bank
    	  
  	
    
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      In a statement, the central bank said "tight credit conditions, the ongoing housing contraction and elevated energy prices are likely to weigh on economic growth over the next few quarters".

    	  
  	
    
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      In addition, it warned that "inflation has been high and some indicators of inflation expectations have been elevated".

    	  
  	
    
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      Economic uncertainty
    	  
  	
    
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      Data published on Tuesday showed that the services sector contracted again in June but not by as much as experts had forecast.

    	  
  	
    
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      Second-quarter gross domestic product (GDP) growth was a stronger-than-expected 1.9%, on an annual basis, although this was aided by government stimulus measures.

    	  
  	
    
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      Unemployment, meanwhile, has risen to a four-year high while consumer spending is weak, rising only 0.2% in June.

    	  
  	
    
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      Some analysts believe the Fed will adopt a "wait and see" stance as long as the economic outlook does not deteriorate markedly.

    	  
  	
    
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      "My view has been all along and it remains that the Fed is going to be on hold for a good deal of time," said Deutsche Bank's Josh Feinman.

    	  
  	
    
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Story from BBC NEWS:<br>
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7543772.stm<br>
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Published: 2008/08/05 20:42:13 GMT<br>
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&copy; BBC MMVIII<br>
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